EX-99.1 2 v082520_ex99-1.txt Whole Foods Market Reports Third Quarter Results Company Reports Comparable Store Sales Increase of 7.0% on Top of 9.9% Increase in Prior Year and Diluted Earnings Per Share of $0.35; Company Repurchases $100 Million of Stock and Pays $25 million in Cash Dividends in Quarter; 18 New Stores Opened over Last Twelve Months AUSTIN, Texas, July 31 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc. (Nasdaq: WFMI) today reported sales and earnings for the 12-week quarter ended July 1, 2007. Sales increased 13.2% to $1.5 billion driven by 14% ending square footage growth and a 7.0% increase in comparable store sales on top of a 9.9% increase in the prior year. The negative impact on comparable store sales growth of Easter shifting from the third quarter last year to the second quarter this year was approximately 76 basis points in the quarter. Identical store sales (excluding four relocated stores and two major expansions) increased 5.8%. Net income was $49.1 million, diluted earnings per share were $0.35, operating cash flow per share was $0.87, and Economic Value Added (EVA(TM)) was $15.6 million. For the quarter, pre-opening and relocation costs were $15.0 million, or $0.06 per diluted share, compared to $7.9 million, or $0.03 per diluted share, in the third quarter last year. Approximately $8.6 million, or $0.04 per diluted share, relating to share-based compensation, pre-opening rent and accelerated depreciation was expensed for accounting purposes but was non-cash, compared to $6.3 million, or $0.03 per diluted share, in the prior year. During the quarter, the Company produced $123 million in cash flow from operations and received $4 million in proceeds from the exercise of stock options. Capital expenditures in the quarter were $128 million of which $95 million was for new stores. The Company paid approximately $25 million to shareholders in cash dividends and repurchased approximately $100 million of common stock. The Company's remaining authorization for share repurchases is currently $100 million. At the end of the quarter, the Company had total cash and investments of approximately $35 million and total long-term debt of approximately $3 million. The Company also expanded its existing $100 million revolving credit line to $200 million during the quarter. "As expected, fiscal year 2007 has been an investment year as we have accelerated our new store openings while cycling over tough year-ago comparable store sales growth comparisons. We believe that our third quarter results, combined with our 7.6% comparable store sales increase in the fourth quarter to date, is an indication that our comparable store sales growth has stabilized," said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. "We are on track to deliver 18 to 20 new store openings this year. We expect to open a greater number of stores in fiscal year 2008, but currently do not expect the same degree of year-over-year increase in our total pre-opening expenses. We are very excited to see the acceleration in our new store openings materialize, as we expect these new stores to drive strong sales and comparable store sales growth in the not-so-distant future." For the 40-week period ended July 1, 2007, sales increased 12.3% to $4.8 billion driven by 14% ending square footage growth and comparable store sales growth of 6.7% on top of an 11.7% increase in the prior year. Sales in identical stores (excluding five relocated stores and three major expansions) increased 5.7%. Net income was $148.8 million, diluted earnings per share were $1.05, operating cash flow per share was $2.12, and EVA was $38.2 million. Year to date, pre-opening and relocation costs were $46.9 million, or $0.20 per diluted share, compared to $23.7 million, or $0.10 per diluted share, in the prior year. Approximately $25.2 million, or $0.11 per diluted share, relating to share-based compensation, pre-opening rent and accelerated depreciation was expensed for accounting purposes but was non-cash, compared to $14.6 million, or $0.06 per diluted share, in the prior year. The Company's Consolidated Statements of Operations on a Non-GAAP Basis (hereinafter referred to as adjusted results) exclude pre-tax credits for insurance proceeds and other adjustments related to Hurricane Katrina of $3.7 million in the third quarter of fiscal year 2006 and $7.2 million in the 40-week period ended July 2, 2006. Excluding these credits, adjusted earnings per share were $0.35 in the third quarter last year and $1.10 for the 40-week period ended July 2, 2006. The following table shows the Company's growth in sales, comparable store sales, and ending square footage year to date compared to its historical five-year ranges and average results. For fiscal year 2007, the Company has guided to sales growth of 13% to 17%, comparable store sales growth of 6% to 8%, and ending square footage growth of 16%. Five-Year FY Range Five-Year YTD Low High FY Average FY07 Sales growth 17.0% 22.8% 20.3% 12.3% Comparable store sales growth 8.6% 14.9% 11.5% 6.7% Two-year comps (sum of two years) 18.6% 27.8% 22.7% 18.4% Ending square footage growth 10% 14% 12% 14% The following table breaks out additional information on the quarter for comparable stores and all stores. NOPAT # of Average Total Comparable Stores Comps ROIC Stores Size Square Feet Over 11 years old 4.1% 91% 59 27,600 1,626,200 Between eight and 11 years old 3.7% 68% 26 31,100 807,600 Between five and eight years old 6.1% 44% 43 34,700 1,492,400 Between two and five years old 8.3% 29% 37 40,300 1,491,600 Less than two years old (includes four relocations) 22.6% 1%* 18 54,400 979,500 All comparable stores (7.5 years old, s.f weighted) 7.0% 40%* 183 35,000 6,406,300 All stores (6.8 years old, s.f. weighted) 33%* 196 36,200 7,104,800 * Includes pre-opening expense for stores less than two years old. Excluding the Kensington relocation, NOPAT ROIC was 10%, 43% and 35% for comparable stores less than two years old, all comparable stores, and all stores, respectively. Note that due to certain operational changes, some expenses previously included in cost of goods sold are now included in direct store expenses, representing an estimated impact of approximately 16 basis points on those line items in the quarter. For comparable stores, the following year-over-year basis point changes in gross profit and direct store expenses as a percentage of sales adjust for this impact. Gross profit consists of sales less cost of goods sold and occupancy costs plus the contribution from non-retail distribution and food preparation operations. For the third quarter, gross profit increased 36 basis points to 35.5% of sales from an adjusted 35.2% of sales last year, which excludes approximately $0.9 million in credits related to Hurricane Katrina. The LIFO charge was $2.1 million in the quarter compared to $0.8 million in the prior year. For stores in the comparable store base, gross profit improved 42 basis points to 35.7% of sales. Historically, the Company's average weekly sales and gross margins are strongest in the second and third quarters. For the quarter, direct store expenses increased 90 basis points to 26.1% of sales from an adjusted 25.2% of sales last year, which excludes approximately $1.2 million in credits related to Hurricane Katrina. For stores in the comparable store base, direct store expenses increased 23 basis points to 25.4% of sales due primarily to increases in health care and share-based compensation expense, which were partially offset by leverage in wages as a percentage of sales. Share-based compensation expense included in direct store expenses was approximately $2.3 million in the quarter compared to approximately $0.5 million in the prior year. Store contribution decreased 54 basis points to 9.5% of sales from an adjusted 10.0% of sales last year, which excludes approximately $2.0 million in credits related to Hurricane Katrina. For stores in the comparable store base, store contribution increased 19 basis points to 10.3% of sales. G&A expenses improved five basis points to 3.2% of sales. Share-based compensation expense included in G&A was approximately $1.6 million compared to approximately $0.9 million in the prior year. The following table shows the Company's year-to-date results for certain line items as a percentage of sales compared to its historical five-year ranges and averages, highlighting the consistency of these results on an annualized basis over time. Where applicable, historical percentages have been adjusted to exclude Hurricane Katrina charges and credits, as well as share-based compensation expense related to the Company's September 2005 accelerated vesting of stock options. Five-Year FY Range Five-Year FY YTD Low High Average FY07 Gross profit 34.2% 35.1% 34.8% 34.9% Direct store expenses 25.2% 25.5% 25.4% 25.9% Store contribution 9.0% 9.6% 9.4% 9.0% G&A 3.1% 3.6% 3.2% 3.1% For the quarter, pre-opening and relocation costs were $15.0 million, or $0.06 per diluted share, of which approximately $4.4 million was pre-opening rent and accelerated depreciation that was expensed for accounting purposes but was non-cash. In the prior year, pre-opening and relocation costs were $7.9 million, or $0.03 per diluted share, of which approximately $5.4 million was non-cash pre-opening rent and accelerated depreciation. New Store Development In the third quarter, the Company opened one store in El Segundo, CA, one store in Sonoma, CA, and relocated its Notting Hill Fresh & Wild store in London to its new Kensington Whole Foods Market location. Thus far in the fourth quarter, the Company has opened one store in Chicago, IL and expects to open four to six additional stores during the quarter, two of which are relocations. As of today, the Company has opened 18 new stores over the last 12 months. The Company has recently signed seven new store leases averaging 39,000 square feet in size which are as follows: Malibu, CA; San Francisco, CA; Toronto, Canada; Kailua, HI; Maui, HI; Lynnfield, MA; and Rochester Hills, MI. Since its second quarter earnings release on May 9, the Company has opened three new stores, and 10 leases have been tendered. For accounting purposes, a store is considered tendered on the date the Company takes possession of the space for construction and other purposes, which is typically when the shell of the store is complete or nearing completion. The average tender period, or length of time between tender date and opening date, will vary depending on several factors, one of which is the number of acquired leases, ground leases and owned properties in development, all of which generally have longer tender periods than standard operating leases. The following table provides additional information about the Company's store openings in fiscal year 2006 and thus far in fiscal year 2007, leases currently tendered but not opened, and total development pipeline for stores scheduled to open through fiscal year 2010. Of the Company's 25 stores currently tendered, 23 are expected to open between now and the end of fiscal year 2008, and the Company expects to announce additional stores over the next two quarters tendered for openings in fiscal year 2008.
Stores Stores Current Current Opened Opened Leases Leases New Store Information FY06 FY07 YTD Tendered Signed(1) Number of stores (including relocations) 13 14 25 94 Number of relocations 2 3 3 17 Number of lease acquisitions, ground leases and owned properties 1 4 9 15 New markets 4 2 3 21 Average store size (gross square feet) 50,200 56,600 48,400 53,000 As a percentage of existing store average size 147% 156% 133% 146% Total square footage 653,000 792,000 1,210,000 5,021,000 As a percentage of existing square footage 10% 11% 17% 70% Average tender period 7.8 months 9.7 months Average pre-opening expense per store (incl. rent) $1.9 million $2.4 million(2) Average pre-opening rent per store $0.7 million $0.9 million(2) Average development cost (excl. pre-opening) $13.0 million $15.0 million(2) Average development cost per square foot $258 $2822
(1) Includes leases tendered (2) Pre-opening and development costs are estimated for stores opened YTD and exclude Kensington in London Growth Goals for Fiscal Year 2007 and Beyond The Company's guidance for fiscal year 2007 excludes any impact from the proposed merger with Wild Oats Markets, as the transaction has not closed. The Company notes that fiscal year 2007 is a 53-week year, with the extra week falling in the fourth quarter making it a thirteen-week quarter. For fiscal year 2007, on a 52-week to 52-week basis, the Company expects total sales growth of 13% to 17% and comparable store sales growth of 6% to 8%. Year to date, the Company has opened 14 stores and expanded two stores representing approximately 781,000 square feet net of closures related to three relocations. In addition to one store already open in the fourth quarter, four to six of the Company's 25 currently tendered stores, representing up to approximately 278,000 square feet net of closures, are expected to open in the fourth quarter, translating to an estimated year-over-year increase in ending square footage of approximately 16%. For fiscal year 2007, the Company expects operating income before pre-opening and relocation costs as a percentage of sales to be in line with its 5.9% results year to date. The Company expects share-based compensation, a non-cash expense, of approximately $3 million to $4 million in the fourth quarter. Capital expenditures for fiscal year 2007 are expected to be in the range of $525 million to $575 million. Of this amount, approximately 70% to 75% is related to new stores opening in fiscal year 2007 and beyond. The Company has incurred materially higher pre-opening and relocation costs of approximately $47 million year to date compared to approximately $24 million for the same period last year resulting primarily from the acceleration in square footage opening in fiscal years 2007 and 2008. As expected, these costs have had a significant negative impact on fiscal year 2007 diluted earnings per share growth. For the fourth quarter, the Company expects pre-opening and relocation costs in the range of $20 million to $24 million. Fiscal year 2007 results are expected to include approximately $33 million to $36 million, or approximately $0.14 or $0.15 per share, of non-cash pre-opening rent, accelerated depreciation, and share-based compensation expense. Longer term, the Company's goal is to reach $12 billion in sales in fiscal year 2010. Proposed Merger with Wild Oats Markets The U.S. District Court for the District of Columbia preliminary injunction hearing to decide whether to approve the U.S. Federal Trade Commission's (FTC) application for an injunction to block the proposed merger between Whole Foods Market and Wild Oats Markets began today and is scheduled to conclude on August 1, 2007. The Company expects to receive a ruling by the middle of August. The Company announced on June 20, 2007 that, subject to prevailing in its current lawsuit with the FTC concerning the proposed merger, the Company plans to transfer all 35 Henry's and Sun Harvest store locations, plus a Riverside, CA distribution center, to a wholly owned subsidiary of Smart & Final, Inc., a Los Angeles-based food retailer. "We are hopeful that the court will rule in our favor and that we will be allowed to move forward; however, we believe that merger or no merger, Whole Foods Market has a very bright future," said Mr. Mackey. "We currently have 94 stores in our pipeline representing 70 percent of our existing square footage, and we believe we are on track to meet our goal of $12 billion in sales in 2010. If the merger is approved, just as we have done with our many previous acquisitions, we will improve the Wild Oats stores to make them more profitable and create an improved shopping experience for our customers." About Whole Foods Market: Founded in 1980 in Austin, Texas, Whole Foods Market(R) is a Fortune 500 company and the largest natural and organic foods retailer. The Company had sales of $5.6 billion in fiscal year 2006 and currently has 197 stores in the United States, Canada and the United Kingdom. Forward-looking statements The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, which could cause our actual results to differ materially from those described in the forward-looking statements. These risks include but are not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the SEC reports of Whole Foods Market, including Whole Foods Market's report on Form 10-K for the fiscal year ended September 24, 2006. Whole Foods Market undertakes no obligation to update forward-looking statements. The Company will host a conference call today to discuss this earnings announcement at 4:00 p.m. CT. The dial-in number is 1-800-909-5202, and the conference ID is "Whole Foods." A simultaneous audio webcast will be available at www.wholefoodsmarket.com. Contact: Cindy McCann VP of Investor Relations 512.542.0204 Whole Foods Market, Inc. Consolidated Statements of Operations - Non-GAAP basis (unaudited) (In thousands, except per share amounts) Twelve weeks ended July 1, 2007 Natural GAAP Disaster Non-GAAP Sales $1,514,420 $ -- $1,514,420 Cost of goods sold and occupancy costs 976,130 -- 976,130 Gross profit 538,290 -- 538,290 Direct store expenses 394,713 -- 394,713 Store contribution 143,577 -- 143,577 General and administrative expenses 49,003 -- 49,003 Operating income before pre-opening and relocation 94,574 -- 94,574 Pre-opening expenses 13,719 -- 13,719 Relocation costs 1,276 -- 1,276 Operating income 79,579 -- 79,579 Investment and other income, net 2,199 -- 2,199 Income before income taxes 81,778 -- 81,778 Provision for income taxes 32,711 -- 32,711 Net income $ 49,067 -- $ 49,067 Basic earnings per share $ 0.35 $ -- $ 0.35 Weighted average shares outstanding 140,061 140,061 140,061 Diluted earnings per share $ 0.35 $ -- $ 0.35 Weighted average shares outstanding, diluted basis 141,250 141,250 141,250 Dividends per share $ 0.18 $ 0.18 Twelve weeks ended July 2, 2006 Natural GAAP Disaster Non-GAAP Sales $1,337,886 $ -- $1,337,886 Cost of goods sold and occupancy costs 866,260 879 867,139 Gross profit 471,626 (879) 470,747 Direct store expenses 335,555 1,152 336,707 Store contribution 136,071 (2,031) 134,040 General and administrative expenses 43,955 43,955 Operating income before pre-opening and relocation 92,116 (2,031) 90,085 Pre-opening expenses 6,604 -- 6,604 Relocation costs 1,256 -- 1,256 Operating income 84,256 (2,031) 82,225 Investment and other income, net 5,573 (1,621) 3,952 Income before income taxes 89,829 (3,652) 86,177 Provision for income taxes 35,931 (1,461) 34,470 Net income $ 53,898 $ (2,191) $ 51,707 Basic earnings per share $ 0.38 $ (0.02) $ 0.37 Weighted average shares outstanding 140,712 140,712 140,712 Diluted earnings per share $ 0.37 $ (0.02) $ 0.35 Weighted average shares outstanding, diluted basis 145,925 145,925 145,925 Dividends per share $ 0.15 $ 0.15 A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in thousands): Twelve weeks ended July 1, 2007 Natural GAAP Disaster Non-GAAP Net income (numerator for basic earnings per share) $ 49,067 $ -- $ 49,067 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 19 -- 19 Adjusted net income (numerator for diluted earnings per share) $ 49,086 $ -- $ 49,086 Weighted average common shares outstanding (denominator for basic earnings per share) 140,061 140,061 140,061 Potential common shares outstanding: Assumed conversion of 5% zero coupon convertible subordinated debentures 97 97 97 Assumed exercise of stock options 1,092 1,092 1,092 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 141,250 141,250 141,250 Basic earnings per share $ 0.35 $ -- $ 0.35 Diluted earnings per share $ 0.35 $ -- $ 0.35 Twelve weeks ended July 2, 2006 Natural GAAP Disaster Non-GAAP Net income (numerator for basic earnings per share) $ 53,898 $ (2,191) $ 51,707 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 61 -- 61 Adjusted net income (numerator for diluted earnings per share) $ 53,959 $ (2,191) $ 51,768 Weighted average common shares outstanding (denominator for basic earnings per share) 140,712 140,712 140,712 Potential common shares outstanding: Assumed conversion of 5% zero coupon convertible subordinated debentures 335 335 335 Assumed exercise of stock options 4,878 4,878 4,878 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 145,925 145,925 145,925 Basic earnings per share $ 0.38 $ (0.02) $ 0.37 Diluted earnings per share $ 0.37 $ (0.02) $ 0.35 Whole Foods Market, Inc. Consolidated Statements of Operations - Non-GAAP basis (unaudited) (In thousands, except per share amounts) Forty weeks ended July 1, 2007 Natural GAAP Disaster Non-GAAP Sales $4,848,361 $ -- $4,848,361 Cost of goods sold and occupancy costs 3,154,840 -- 3,154,840 Gross profit 1,693,521 -- 1,693,521 Direct store expenses 1,256,805 -- 1,256,805 Store contribution 436,716 -- 436,716 General and administrative expenses 150,591 -- 150,591 Operating income before pre-opening and relocation 286,125 -- 286,125 Pre-opening expenses 40,717 -- 40,717 Relocation costs 6,196 -- 6,196 Operating income 239,212 -- 239,212 Investment and other income, net 8,806 -- 8,806 Income before income taxes 248,018 -- 248,018 Provision for income taxes 99,207 -- 99,207 Net income $ 148,811 -- $ 148,811 Basic earnings per share $ 1.06 $ -- $ 1.06 Weighted average shares outstanding 140,411 140,411 140,411 Diluted earnings per share $ 1.05 $ -- $ 1.05 Weighted average shares outstanding, diluted basis 142,366 142,366 142,366 Dividends per share $ 0.69 $ 0.69 Forty weeks ended July 2, 2006 Natural GAAP Disaster Non-GAAP Sales $4,316,359 $ -- $4,316,359 Cost of goods sold and occupancy costs 2,806,298 879 2,807,177 Gross profit 1,510,061 (879) 1,509,182 Direct store expenses 1,090,463 4,232 1,094,695 Store contribution 419,598 (5,111) 414,487 General and administrative expenses 138,265 -- 138,265 Operating income before pre-opening and relocation 281,333 (5,111) 276,222 Pre-opening expenses 20,123 -- 20,123 Relocation costs 3,552 -- 3,552 Operating income 257,658 (5,111) 252,547 Investment and other income, net 15,720 (2,121) 13,599 Income before income taxes 273,378 (7,232) 266,146 Provision for income taxes 109,351 (2,893) 106,458 Net income $ 164,027 $ (4,339) $ 159,688 Basic earnings per share $ 1.18 $ (0.03) $ 1.15 Weighted average shares outstanding 139,062 139,062 139,062 Diluted earnings per share $ 1.13 $ (0.03) $ 1.10 Weighted average shares outstanding, diluted basis 145,567 145,567 145,567 Dividends per share $ 2.45 $ 2.45 A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in thousands): Forty weeks ended July 1, 2007 Natural GAAP Disaster Non-GAAP Net income (numerator for basic earnings per share) $148,811 $ -- $148,811 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 77 -- 77 Adjusted net income (numerator for diluted earnings per share) $148,888 $ -- $148,888 Weighted average common shares outstanding (denominator for basic earnings per share) 140,411 140,411 140,411 Potential common shares outstanding: Assumed conversion of 5% zero coupon convertible subordinated debentures 122 122 122 Assumed exercise of stock options 1,833 1,833 1,833 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 142,366 142,366 142,366 Basic earnings per share $ 1.06 $ -- $ 1.06 Diluted earnings per share $ 1.05 $ -- $ 1.05 Forty weeks ended July 2, 2006 Natural GAAP Disaster Non-GAAP Net income (numerator for basic earnings per share) $ 164,027 $ (4,339) $ 159,688 Interest on 5% zero coupon convertible subordinated debentures, net of income taxes 225 -- 225 Adjusted net income (numerator for diluted earnings per share) $ 164,252 $ (4,339) $ 159,913 Weighted average common shares outstanding (denominator for basic earnings per share) 139,062 139,062 139,062 Potential common shares outstanding: Assumed conversion of 5% zero coupon convertible subordinated debentures 378 378 378 Assumed exercise of stock options 6,127 6,127 6,127 Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) 145,567 145,567 145,567 Basic earnings per share $ 1.18 $ (0.03) $ 1.15 Diluted earnings per share $ 1.13 $ (0.03) $ 1.10 Whole Foods Market, Inc. Consolidated Balance Sheets (unaudited) July 1, 2007 and September 24, 2006 (In thousands) Assets 2007 2006 Current assets: Cash and cash equivalents $ 10,709 $ 2,252 Short-term investments - available- for-sale securities 22,048 193,847 Restricted cash 2,280 60,065 Accounts receivable 84,321 87,387 Merchandise inventories 241,705 203,727 Deferred income taxes 56,738 48,149 Prepaid expenses and other current assets 28,213 28,554 Total current assets 446,014 623,981 Property and equipment, net of accumulated depreciation and amortization 1,483,283 1,236,133 Goodwill 113,494 113,494 Intangible assets, net of accumulated amortization 54,911 34,767 Deferred income taxes 34,376 29,412 Other assets 10,104 5,209 Total assets $ 2,142,182 $ 2,042,996 Liabilities And Shareholders' Equity 2007 2006 Current liabilities: Current installments of long-term debt and capital lease obligations $ 81 $ 49 Accounts payable 142,392 126,264 Accrued payroll, bonus and other benefits due team members 164,990 153,014 Dividends payable 25,015 -- Other current liabilities 239,444 230,443 Total current liabilities 571,922 509,770 Long-term debt and capital lease obligations, less current installments 2,893 8,606 Deferred rent liability 132,564 120,421 Other long-term liabilities -- 56 Total liabilities 707,379 638,853 Shareholders' equity: Common stock, no par value, 300,000 shares authorized; 143,534 and 142,198 shares issued; 138,987 and 139,607 shares outstanding in 2007 and 2006, respectively 1,222,176 1,147,872 Common stock in treasury, at cost (199,961) (99,964) Accumulated other comprehensive income 11,243 6,975 Retained earnings 401,345 349,260 Total shareholders' equity 1,434,803 1,404,143 Commitments and contingencies Total liabilities and shareholders' equity $ 2,142,182 $ 2,042,996 Whole Foods Market, Inc. Consolidated Statements of Cash Flows (unaudited) July 1, 2007 and July 2, 2006 (In thousands) Forty weeks ended July 1, July 2, 2007 2006 Cash flows from operating activities Net Income $ 148,811 $ 164,027 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 137,643 118,648 Loss (gain) on disposition of assets 3,562 (1,001) Share-based compensation 10,687 4,383 Excess tax benefit related to exercise of employee stock options (11,609) (55,494) Deferred income tax benefit (13,553) (19,073) Deferred rent 9,950 13,547 Other 3,934 797 Net change in current assets and liabilities: Accounts receivable 3,066 19,445 Merchandise inventories (42,278) (38,182) Prepaid expense and other current assets 2,828 (29,546) Accounts payable 16,128 12,937 Accrued payroll, bonus and other benefits due team members 11,976 23,637 Other accrued expenses 20,389 124,585 Net cash provided by operating activities 301,534 338,710 Cash flows from investing activities Development costs of new store locations (272,923) (111,482) Other property and equipment expenditures (109,937) (86,335) Proceeds from hurricane insurance -- 3,308 Acquisition of intangible assets (22,351) (16,204) Purchase of available-for-sale securities (270,206) (497,071) Sale of available-for-sale securities 440,818 209,110 Increase in restricted cash 57,785 (22,449) Payment of acquisition-related costs (3,841) -- Net cash used in investing activities (180,655) (521,123) Cash flows from financing activities Dividends paid (71,711) (336,889) Issuance of common stock 47,742 208,641 Purchase of treasury stock (99,997) -- Excess tax benefit related to exercise of employee stock options 11,609 55,494 Payments on long-term debt and capital lease obligations (65) (5,612) Net cash used in financing activities (112,422) (78,366) Net change in cash and cash equivalents 8,457 (260,779) Cash and cash equivalents at beginning of period 2,252 308,524 Cash and cash equivalents at end of period $ 10,709 $ 47,745 Supplemental disclosure of cash flow information: Interest paid $ 232 $ 531 Federal and state income taxes paid $ 107,926 $ 18,679 Non-cash transactions: Conversion of convertible debentures into common stock $ 5,686 $ 4,910 Whole Foods Market, Inc. Non-GAAP Financial Measures (unaudited) (In thousands) In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides information regarding Economic Value Added ("EVA") and Operating Cash Flow per Share in the press release as additional information about its operating results. These measures are not in accordance with, or an alternative to, GAAP. The Company's management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company and EVA for incentive compensation and capital planning purposes. The following is a tabular reconciliation of the EVA non-GAAP financial measure to GAAP net income, which the Company believes to be the most directly comparable GAAP financial measure. Twelve weeks ended Forty weeks ended July 1, July 2, July 1, July 2, 2007 2006 2007 2006 EVA Net income $ 49,067 $ 53,898 $148,811 $164,027 Provision for income taxes 32,711 35,931 99,207 109,351 Interest expense and other 6,760 4,176 20,542 10,780 NOPBT 88,538 94,005 268,560 284,158 Income taxes (40%) 35,415 37,602 107,424 113,663 NOPAT 53,123 56,403 161,136 170,495 Capital Charge 37,564 35,815 122,931 114,413 EVA $ 15,559 $ 20,588 $ 38,205 $ 56,082 The following is a tabular reconciliation of the numerator of the Operating Cash Flow per Share non-GAAP financial measure to GAAP net income, which the Company believes to be the most directly comparable GAAP financial measure.
Twelve weeks ended Forty weeks ended July 1, July 2, July 1, July 2, 2007 2006 2007 2006 Operating Cash Flow per Share Net income $ 49,067 $ 53,898 $ 148,811 $ 164,027 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 42,509 37,340 137,643 118,648 Loss (gain) on disposition of assets 852 242 3,562 (1,001) Share-based compensation 4,168 1,309 10,687 4,383 Excess tax benefit related to exercise of employee stock options (836) (12,431) (11,609) (55,494) Deferred income tax benefit (4,169) (13,356) (13,553) (19,073) Deferred rent 7,206 7,219 9,950 13,547 Other 3,430 (1,921) 3,934 797 Net change in current assets and liabilities: Accounts receivable 11,284 28,026 3,066 19,445 Merchandise inventories (6,469) (12,395) (42,278) (38,182) Prepaid expense and other current assets 4,684 (21,449) 2,828 (29,546) Accounts payable (2,664) (227) 16,128 12,937 Accrued payroll, bonus and other benefits due team members 6,129 7,604 11,976 23,637 Other accrued expenses 7,364 50,020 20,389 124,585 Net cash provided by operating activities $ 122,555 $ 123,879 $ 301,534 $ 338,710 Weighted average shares outstanding, diluted basis 141,250 145,925 142,366 145,567 Operating Cash Flow per Share $ 0.87 $ 0.85 $ 2.12 $ 2.33
SOURCE Whole Foods Market, Inc.